ScholarWorks@숙명여자대학교

초록

This study analyzes the effects of economic cooperation between South and North Korea on both countries’ economic growth, employing a growth accounting method. In contrast to previous studies, the investment and employment of the Kaesong Industrial Region(KIR) are included into the production function of North Korea in this study, since we regard the economic cooperation between South and North Korea as a vertical FDI. The growth accounting results suggest that the KIR raise South and North Korea’s GDP by 0.02% and 0.6% respectively. Comparing to the FDI to other countries, the net effect on South Korea’s GDP shrinks to the 0.01%. Though these estimates are quite smaller than the previous studies, we do not exclude the large potential gains of indirect effects from economic cooperations between South and North Korea, such as disarmament, increasing tourists and FDI into both countries, reduction of future unification costs. The small economic effects of KIR suggest that it is necessary to improve the current way of economic cooperation between two Koreas.

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